From West to East: Estimating External Spillovers to Australia and New Zealand

Author/Editor:

Yan M Sun

Publication Date:

May 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the size and source of external spillovers to Australia and New Zealand based on a structural vector autoregression (VAR) approach. It finds that during the last decade shocks from emerging Asia have become more important than those from the United States in affecting Australia’s business cycle. A 1 percent shock to emerging Asia’s growth is found to shift Australian growth by about 1/3 percent. Furthermore, there is evidence that commodity prices dominate the transmission of shocks from emerging Asia to Australia. The influence of emerging Asia on New Zealand is found to come indirectly through Australia, with Australian shocks transmitting almost "one-on-one" to New Zealand, largely through financial factors.

Series:

Working Paper No. 2011/120

Subject:

Business cycles Commodity price indexes Commodity prices Econometric analysis Economic growth Financial sector policy and analysis Prices Spillovers Vector autoregression

English

Publication Date:

May 1, 2011

ISBN/ISSN:

9781455262434/1018-5941

Stock No:

WPIEA2011120

Pages:

21

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